US Treasury Secretary Janet Yellen today said that interest rates may "have to rise somewhat" to prevent the US economy from overheating - and that cold bucket of water caused markets to react. The Bitcoin market was no exception, dropping 7% following Yellen's comments. Yellen today said in an interview with The Atlantic that the change in course may be necessary due to higher levels of government spending. "It may be that interest rates will have to rise somewhat to make sure our economy doesn't overheat," she said. "Even though the additional spending is relatively small, relative to the size of the economy, so it could cause some very modest increases in interest rates to get that reallocation." Yellen, a Bitcoin critic who was appointed Treasury Secretary in January, added that President Biden's heavy spending would benefit the economy. So where does Bitcoin and the crypto world come into all this? The markets slumped across the board, including Bitcoin and the rest of crypto (save Dogecoin, of course)- and the US dollar touched session highs.

Why the sell-off? If interest rates are to rise, investors could, theoretically, be less inclined to look at alternative assets-such as Bitcoin. This is because interest-bearing investments, such as bonds or debt-based instruments, would be more attractive. Lower interest rates tend to go together with higher inflation, in turn making Bitcoin a hedge against the potential devaluation of the dollar.